Financial Aspects of Intellectual Property

Wednesday, September 17, 2008

Janet Rae-Dupree posited recently in the New York Times in a piece entitled “When Academia Puts Profit Ahead of Wonder” that “in trying to power the innovation economy, the Bayh-Dole Actturned America’s universities into cutthroat business competitors, zealously guarding the very innovations we so desperately want behind a hopelessly tangled web of patents and royalty licenses.” She points out that the fundamental mission of universities - “discovery for its own sake” - has been distorted, and that they now function more like “corporate research laboratories” driven by considerations of market potential over “blue-sky” experimental research.

She might have a point. Certainly intellectual property is now viewed as a key value driver for businesses, private and public labs, universities and entire emerging economies among others. Universities had previously felt constrained in their ability to create wealth out of their government-financed innovation before Bayh-Dole “liberated” them.

My sense is that university technology commercialization offices are in constant search of an optimal model that leaves room for mad scientists and innovators within the realm of scientific disciplines that markets are interested in (or for which markets are waiting to be created).

In any event, I asked Peter Slate what he thought. He’s the President & CEO of International Orthopedic Alliance, Inc. (IOA) and was the founder and Chief Executive Officer of Arizona Technology Enterprises, LLC (AzTE), the IP management and technology transfer organization for Arizona State University. Here’s what he had to say:

“I disagree with the article on a number of points:

As a general matter…..while I have heard these types of arguments many times, I still have not heard an argument with any teeth that is more than conjecture regarding the negative effects of tech transfer. Patent protection, a system that pays for innovation, competition…..if these are truly the route of innovation evil I need more facts to be persuaded.

Blue sky research being set aside for research that is more utility-focused (and dare I say…may produce profit) is probably more a result of what public agencies will fund rather than university tech transfer. It might be better to take it up with the NIH and NSF, not university Presidents, if people have complaints. I believe they have a suggestion box somewhere in Washington.

Most tech transfer offices don’t break even and only 13 universities make most of the money (according to the article)….it is hard to believe that tech transfer is having such a broad sweeping negative effect given these statistics.

I believe that all markets are evolutionary…in this case we have universities that are just getting their arms around a system they are not familiar with. Smarter licensing, ties with corporate innovators (remember that many of them came from universities way back when), and a better understanding of how to work with the business community will ultimately yield significant benefits to our system of innovation and competitiveness overall. For example, if universities had more experienced licensing managers with better resources to manage their IP, they would not lock up their technology with one company that cannot exploit technology in all markets. Instead, they would engage in a more segmented licensing strategy.”